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Do Side Payments Help? Collective Decisions and Strategic Delegation

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  • Bård Harstad

Abstract

I investigate when side payments facilitate cooperation in a context with strategic delegation. On the one hand, allowing side payments may be necessary when one party's participation constraint otherwise would be violated. On the other, with side payments each principal appoints a delegate that values the project less, because this increases her bargaining power. Reluctant agents, in turn, implement too few projects. I show that side payments are bad if the heterogeneity is small while the uncertainty and the typical value of the project are large. With a larger number of parties there may be a stalemate without side payments, but delegation becomes more strategic as well, and cooperation decreases in either case. (JEL: C78, D78, F53, H77) (c) 2008 by the European Economic Association.

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  • Bård Harstad, 2008. "Do Side Payments Help? Collective Decisions and Strategic Delegation," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 468-477, 04-05.
    • Handle: RePEc:tpr:jeurec:v:6:y:2008:i:2-3:p:468-477
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    Cited by:

    1. Fidrmuc, Jan, 2015. "Political economy of fiscal unions," European Journal of Political Economy, Elsevier, vol. 40(PA), pages 147-157.
    2. Alejandro Caparrós, 2016. "Bargaining and International Environmental Agreements," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(1), pages 5-31, September.
    3. Robert Hahn & Robert Ritz, 2014. "Optimal Altruism in Public Good Provision," Cambridge Working Papers in Economics 1403, Faculty of Economics, University of Cambridge.
    4. Anesti, Vincent & Buisseret, Peter, 2023. "The Politics of Bargaining as a Group," CRETA Online Discussion Paper Series 81, Centre for Research in Economic Theory and its Applications CRETA.
    5. Loeper, Antoine, 2017. "Cross-border externalities and cooperation among representative democracies," European Economic Review, Elsevier, vol. 91(C), pages 180-208.
    6. Martin Gregor, 2011. "Tradeoffs of foreign assistance for the weakest-link global public goods," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(2), pages 233-251, April.
    7. Arvaniti, Maria & Habla, Wolfgang, 2021. "The political economy of negotiating international carbon markets," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
    8. Corinna Ahlfeld, 2010. "Reputation Sells -Compensation Payments in the Political Sphere," Departmental Discussion Papers 145, University of Goettingen, Department of Economics.
    9. Harstad, Bård, 2010. "Strategic delegation and voting rules," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 102-113, February.
    10. Andreas Lange & Claudia Schwirplies, 2017. "(Un)fair Delegation: Exploring the Strategic Use of Equity Rules in International Climate Negotiations," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(3), pages 505-533, July.
    11. Daniel Cardona & Clara Ponsatí, 2015. "Representing a democratic constituency in negotiations: delegation versus ratification," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 45(2), pages 399-414, September.
    12. Peter Claeys & Federico Martire, 2015. "‘If You Want Me to Stay, Pay’: A Model of Asymmetric Federalism in Centralised Countries," Environment and Planning C, , vol. 33(2), pages 305-320, April.

    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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